Retirement Tax Optimizer Calculator

The problem with a great pre-tax balance

Deferring tax was the right call while you were earning. The bill it created has been compounding ever since, and unlike your portfolio, you do not control when it comes due. At 73 or 75 the IRS starts setting your withdrawal for you, and the required distribution grows as a share of the balance every year — 1/24.6th at 75, 1/16th at 85, 1/11.5th at 91. A $2.5 million pre-tax balance that keeps growing generates a six-figure taxable distribution whether or not you need the money.

What makes it expensive is not the bracket. It is everything the bracket drags along: Social Security becoming 85% taxable, capital gains pushed out of the 0% rate, a Medicare surcharge triggered by a number you set two years ago, the 3.8% net investment income tax, and — for married couples — the near-certainty that one of you will spend years filing single at substantially the same income.

The gap years are the whole opportunity

Between the year wages stop and the year RMDs start — and especially before Social Security begins — a household with a large pre-tax balance often has almost no taxable income. Living expenses come from the brokerage account, where only the gain above basis is taxed, frequently at 0%. That leaves an entire bracket sitting empty every year.

Filling it deliberately with a Roth conversion is the single highest-leverage move available. You choose the rate, you choose the year, and every dollar moved is a dollar that will never produce an RMD, never push Social Security into taxability, never cross an IRMAA tier, and never land on an heir during their peak earning years. The question is only how much to convert — which is what the strategy comparison above is for.

The catch: the gap years are not free before 65

The same low-income years that make conversions cheap are the years you are most likely to be buying your own health insurance. Marketplace premium tax credits are calculated from household MAGI, and a Roth conversion is MAGI. Every dollar you convert phases the credit down by roughly ten cents — and at 400% of the federal poverty level, the credit does not taper at all. It vanishes.

The enhanced subsidies passed in 2021 capped premiums at 8.5% of income with no upper limit, which removed that cliff for four years. They expired after 2025. From the 2026 tax year the old rule is back, and for a couple in their early sixties the credit at stake is routinely $15,000 to $25,000 a year — more than the tax on the conversion that triggered the loss.

That does not mean stop converting. It means the cliff is a hard edge to convert up to rather than through, and it means checking where your baseline income already sits: a household spending heavily from a low-basis brokerage account can clear 400% of poverty without converting a dollar, in which case there is no subsidy left to protect and the cheap years really are cheap. The strategy comparison above prices both cases.

Rules of thumb

• Compare your conversion rate to your heirs' rate, not just your own future rate. If your children are mid-career professionals, the inherited IRA gets emptied within 10 years at 32% or 35% plus their state tax. Converting at 24% is a bargain against that.
• Watch the cliff two years ahead. IRMAA uses MAGI from two years back, so the conversions you make at 62 and 63 set your Medicare premium at 64 and 65. Converting hard before the lookback window opens is nearly free of IRMAA cost.
• Convert while you are still married filing jointly. The survivor's brackets are roughly half as wide at nearly the same income. Every dollar converted during joint years is a dollar that never gets taxed at single rates.
• Pay conversion tax from the brokerage account, never from the conversion. Using converted dollars to pay the tax shrinks the Roth balance and, before 59½, adds a 10% penalty on the withheld amount.
• Under 65, the ACA cliff usually outranks the tax bracket. Losing a $20,000 premium credit to gain bracket space you would have paid 22% on is a bad trade. Compare the "stay under the ACA cliff" strategy against the bracket-filling ones before assuming the gap years are cheap — and check whether your baseline income already clears 400% of poverty, in which case there is no subsidy left to protect and you should convert freely.
• Roth conversions are irreversible. Recharacterization was repealed in 2018. Convert in December, once the year's actual income is known, rather than estimating in January.

Related calculators

• Mega Backdoor Roth — size the after-tax 401(k) contribution itself, year by year.
• Roth Conversion Ladder — the five-year rule mechanics for accessing converted dollars before 59½.
• Social Security — what claiming early or late does to the benefit this calculator taxes.
• Effective Tax Rate — the bracket mechanics underneath all of it.